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NEW YORK CITY ECONOMIC OUTLOOK

05/01/2008


While the bag is certainly mixed in terms of the economic outlook for our wonderful city, condominiums are still flying off the shelves in great numbers in Manhattan, even though the outer boroughs are seeing significant price declines. Many neighborhoods in Brooklyn and Queens have seen condominium and house prices fall by 25% or more.

On the other hand, those real estate deals that are happening for commercial properties have not yet crashed. Notwithstanding Macklowe’s surrender of $7,000,000,000 in prime Manhattan real estate, those commercial sales that are closing are still commanding high prices.

The commercial leasing environment also has not been significantly, negatively impacted yet. That is because the employment lay-offs have not yet begun in earnest. The CRAIN’S NEW YORK BUSINESS article entitled “Pink Slip Shower Rains on Street” (April 21, 2008) is just a “tip of the iceberg”. The great likelihood is that New York City will lose 30,000 to 40,000 jobs in calendar year 2008. That translates into a significant amount of space that will come back onto the market as 2008 progresses.

Clearly, $118 a barrel oil is going to affect many commercial enterprises in New York. We seem to always suffer a little bit later than the rest of the country. But the recession will probably deepen in our lovely city.

One final note: I don’t understand why President Bush refuses to act against continuing increases in the price of oil. $120 for each barrel oil is a major drag on the economy. President Bush could probably reverse the price by $30 to $40 per barrel by releasing one-half million to one million barrels of oil from the Strategic Petroleum Reserve.

Please tell me what you think about the Bush initiative. You can e-mail me at
EdKlein@kleinsolomon.com. -- Edward E. Klein

CRAIN'S NEW YORK BUSINESS
PINK SLIP SHOWER RAINS ON STREET

http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20080420/REG/194460356


The pace of layoffs on Wall Street is quickly picking up.

Last week, Merrill Lynch & Co. said that it would let 3,000 employees go, on top of the 1,100 it has already laid off this year.

Citigroup disclosed it would eliminate 9,000 jobs—7,000 from the consumer banking division and most of the rest from commercial banking. When jobs not filled through attrition are included, 16,000 positions will be cut.

CIT Group Inc. announced that its workforce had shrunk by 500 people, or 9%, in the first quarter.

Wachovia Corp. said it was sacking 12% of its investment bankers.

Meanwhile, about half of the 14,000 employees at Bear Stearns Cos. stand to lose their jobs as J.P. Morgan Chase & Co. swallows their firm. The acquisition is expected to be completed by the end of June.

The job cuts are a direct consequence of what Merrill Lynch Chief Executive John Thain described on a conference call as being “as difficult a quarter as I've seen in my 30 years on Wall Street.”


$14 billion in losses


Mr. Thain's firm posted a first-quarter loss of $2 billion, its third consecutive quarter soaked in red ink. Over the past nine months, Merrill has suffered losses of $14 billion—mostly related to subprime mortgages—exceeding by $1.4 billion its net income generated in the boom years of 2005 and 2006.

The city's Independent Budget Office expects Wall Street firms to shed a total of 20,000 employees locally by the end of 2009, which would amount to an 11% reduction in the city's best-paid workforce. Considering the layoffs under way at Merrill, Citi and others, the IBO's estimate seems conservative.

But even that projection would represent the steepest two-year drop since 2002, when 35,000 securities industry employers in the city—18% of the sector here—lost their jobs, according to data from the Bureau of Labor Statistics.

Many of the early job cuts at Wall Street firms were in subprime and home-lending units located outside New York. The latest cuts are primarily among investment bankers in Manhattan.

-- Aaron Elstein is a Reporter at Crain's New York Business

Copyright 2008 Crain's New York Business

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